The Mexican peso ended this Thursday with an appreciation due to the assimilation of the Federal Reserve’s decision and the GDP data for the second quarter of 2022 in the United States, which contracted 0.9% annualized quarterly, because what central bank officials they may not raise rates as much as previously expected.
According to data from the Bank of Mexico (Banxico), the Mexican currency closed this Thursday with an appreciation of 0.29%, standing at 20.2945 units, which meant its fifth day of appreciation and its highest level since the first of last July.
“For the fifth consecutive day, the dollar falls against the Mexican peso. The decline found a support level around the area of 20.30 units per dollar, a level that also limited falls in early July,” OctaFX technical analysts said.
In the morning, the GDP data in the US was released, which registered a contraction due to the performance of gross fixed investment. With this, two consecutive quarters with falls would be confirmed. Although this is not the official definition of a recession, it increases the probability that the United States will fall into a recession this year.
“(US) GDP was a weak report across the board. The economy may not be in an “official” recession, but it is clearly in a tough spot, with both consumers and businesses pulling back sharply. There is also a risk that the headlines of this report will cause enough anxiety among Americans to further rein in their spending. Perception often trumps reality these days, and recession headlines could be enough to stoke concerns further,” said Callie Cox, Markets Analyst for eToro.
The bets for the next Fed hikes
On the other hand, the money market is assimilating the Fed’s decision, which raised its rate by 75 basis points on Wednesday for the second consecutive meeting. However, Chairman Jerome Powell suggested the central bank could slow the pace in coming months if there is evidence tightening monetary policy is taming America’s worst inflation in four decades.
The odds of the Fed raising rates by 50 basis points in September – rather than a third 75 basis point hike – soared to 65%, from just under 51% on Tuesday.
Blackrock’s Rick Rieder echoed this view, saying in a statement that “it certainly looks possible that the pace of monetary policy tightening may slow in light of what we’ve heard today.” Rieder expects a 50 basis point hike at the Fed’s September meeting and “possibly one or two more 25 basis point hikes” afterward.
The dollar index weakens
The dollar index (DXY) had a day of ups and downs due to greater risk aversion due to the US economic growth data for the second quarter.
The DXY stands at 106.26 points, which meant a drop of 0.07% compared to Wednesday’s close.
“Weak GDP clearly points to a slowing economy. We think softer inflation will be followed by slower growth,” said Vassal Serebriakov, currency strategist at UBS in New York.
The euro falls due to energy uncertainty
The euro was down 0.1% at $1.0184. The single currency has been hit by concerns about the region’s energy crisis.
“The problems for other currencies are mounting, particularly in Europe, where growing fears over gas and energy shortages continue to weigh on the euro and threaten the ECB’s ability to tighten monetary policy as much as it might wish,” he said. Stuart Cole, chief macroeconomic strategist at Equiti Capital in London.
With information from Reuters
